Good morning. The news this week from New Jersey, Pennsylvania and Michigan has only emphasized the sense of a competitive environment which is becoming ever more pressured as the market progresses. As has been discussed this week, Wynn Resorts’ decision to call off its merger with the Austerlitz SPAC is directly related to the costs now incurred in attaining and retaining customers. Similar decisions may now be faced by other brands that don't appear to be in the top tier. Decisions around New York being made right now will bring questions about long-term sustainability truly into focus.

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Gambling.com Group Q3

The top line

• Revenue up 37% YoY to $10.1m while adj. EBITDA was down 14% YoY at $3.5m. NDCs were down 4% to 27k.

• Casino revenue at $7.97m (up 25%), sports revenue at $2.1m (up 142%), other revenue down 58% at $194k.

• Cash balances post-IPO stood at $53.2m.

Westward ho: The third-quarter figures for the newly listed Gambling.com Group were struck by problems in its historically strong markets in Europe including Germany, the Netherlands and Sweden. Hence the somewhat lacklustre NDC count. But the outlook was more positive with organic growth of 40%+ forecast for the FY21, not including any M&A. 

Be thankful for what you’ve got: The company launched ArizonaBets.com over the period as well as MarylandBets.com and like its affiliate marketing peers will be looking to benefit from the opening of the New York market early next year. On the call CEO Charles Gillespie pointed out that at least from an affiliate point of view, the market would be competitive.

“I think it is an open question for the whole industry over what those high taxes will really mean in practice,” Gillespie said. “I don’t think operators will be too focused on the tax rate at the start as they aim for market share and a successful launch but they will really feel the effect of the tax rate as they reach the end of 2022 and beyond.”

Buy side: Gillespie teased on upcoming M&A deals, suggesting the company would be looking at “one or two” deals in the territory of between $20-50m. “In terms of frequency and timing, we don't want to put any firm stakes in the ground,” he said. “We are extremely busy and we look forward to updating everyone when we can.”

“On size, the thinking internally is that in many respects a bigger deal is the same amount of work as a $10m deal,” Gillespie added. “So if it is the same amount of work to do a bigger deal, then we would prefer to do bigger deals. That is why the guidance is $20-50m.”

No quantum leap: He added that he was ruling out matching the likes of Catena Media and Better Collective in terms of an absolute number of deals. “That is not our objective,” he added. “We’re not going to try and go up to that quantum of acquisition, neither in the short nor the long term.”

On Wagers.com

Wynn Resorts is the biggest name so far to suggest the marketing battle in US sports-betting is unsustainable. But earlier in the current results season, it was already evident the pressure is telling. What Kindred and PointsBet had to say about their respective US businesses showed how the barrage of marketing witnessed since the NFL kick-off is making life very tough for brands sitting below the top tier. Scott Longley on the market share squeeze.

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Lottomatica nine months

The top line 

• Revenues +51.7% to €523m, EBITDA +44.5% to €123.3m. Debt stood €1.2bn vs. €547.2m due to Lottomatica Scommesse (LS) and Lottomatica Videolot Ret (LVR) acquisitions.  

• Digital (LS) contributed €1.8bn of the total €4.6bn recorded in wagers vs. €1.4bn YoY. Online betting contributed €1.1bn vs. €372.7m in 2020, online casino €3bn vs. €913.3m in 2020, virtuals €197.9m vs. €138.5m YoY. 

Green card: Land-based momentum was building back gradually as Italy reopened from June, CEO Gugliermo Angelozzi said. Monthly EBITDA pre-green (Covid) pass was down ~16% for July and August vs. 2019 to €25m, but had risen 17% to €35m in September. Angelozzi said this was positive, but it was too early to know if that was a long-term return to 2019 levels. 

The lockdown had led to consumer changes that were sticky, with players enjoying “the different touch points” of social pre-match retail bets with mobile “live bets during the match”. “This is not surprising, Italy is also one of the lowest penetrated jurisdictions for online (gambling) in Europe compared with countries with similar size and economies such as the UK,” Angelozzi said.

Concession booths: There was no update on the potential renewal of betting and gaming machines concessions. The deadline for tenders had passed in June and Angelozzi said a bridging solution could be set up in the interim. The annual costs for the betting concessions were around €20m and €25-33m for gaming machines. “That’s the range,” he added, and with retail outlets closed for a year “not only did we not get the profits but we had to bear the fixed costs. This has to be compensated and we’ve called on the regulator to do this many times”.

Playtech/Caliente SPAC news

Feeling the heat: As reported in the Times today, a potential complication in the now three-way bidding for Playtech is the situation regarding its major client Caliente. According to the paper, both companies are involved in a potential merger with an unnamed SPAC.

Startup shoutouts

SBC Summit First Pitch: Wagers.com has put its name to the pitch competition to be held in a  fortnight at the upcoming SBC Summit North America. It will see five startups pitch their products and business plans to a panel of expert judges, with an audience of industry executives, product selection teams, and investors watching on. The winner will receive a prize package valued at more than $90,000 to help its development and growth plans. Applications will be accepted until November 19. I.e. today. So get pitching.

Promo preview

Inflation worries: Are state revenue and hold figures for US online sports betting inaccurate and over-inflated? How does promotional spend, freebets mainly but also odds boosts and rebates, really impact operators' bottom lines? The topic has bubbled under the radar for some time, but with DraftKings CFO Jason Park and CEO Jason Robins commenting on it recently, Deutsche Bank dived into the detail to examine the impact of promotions on states’ GGR numbers. WE+M will attempt to make sense of it all early next week. 

Sector watch - payments

Safe as houses: The below-guidance performance of Paysafe’s digital wallet product was ascribed on the call with analysts to the situation faced by the igaming operators in Germany and the Netherlands. CEO Philip McHugh cited a “more meaningful impact” than forecast with operators either reducing activity or leaving the market. In terms of market share, McHugh suggested the company had “certainly” lost out with real-time banking and open banking identified as the winners.

“It's creating an attractive option where the digital wallet used to feel that more disproportionate for some of our operators,” McHugh added. “So that's probably the biggest external pressure point we have in terms of volumes, in Europe in particular.”

Surprise, surprise: In the Netherlands, meanwhile, McHugh expressed his evident shock at the limited number of 10 licensees. “(The regulator) really created a surprisingly small (market) and this is a surprise to the industry not just us,” he said. “We're confident that we'll be reversed over the next 4-5 months. It feels like an unexpected overreach from regulators and there's a lot of activity to reverse that. Germany was a more long-term issue, he said, with caps on the amount that can be bet and the issue of the taxes on gaming. “There is a big adjustment happening in Germany and that's an extremely large market for us,:” said McHugh. 

“The operators are all getting locally licensed,” McHugh added. “They're getting adjusted to these new regulations. They're understanding which payments forms work. So we do think over the next six-to-eight months, there'll be an adjustment and a settlement and then get back to growth but it has been an impact.”

Datalines

Michigan: OSB handle was up 28.6% MoM to a record $497.6m in October, GGR was flat at $26.9m. Operators handed out a total of $19.6m in promotions during the month (81% of GGR, down from 100% MoM and 4.2% of handle vs. 6.7% MoM). This meant a GGR total of $7.3m for October and $775K in taxes for the state.  

NFL cross-sell impact: Online casino GGR was up to 7.1% MoM to $109.7m, daily GGR was up 3.7% to $3.54m MoM, DraftKings and FanDuel gained 2.8 and 1 bsps of icasino share respectively, BetMGM dropped 1.9 bsps. Wells Fargo said this was “unsurprising given seasonality/elevated cross-sell into iGaming from on sports-centric platforms”.  OSB share “remains top heavy”, said the team at Eilers & Kreicjik, with FanDuel, DraftKings and BetMGM accounting for 85% of handle.

GC lead: BetMGM was market leader in aggregate OSB and icasino share at $50.2m GGR (36.8% share), followed by FanDuel at $28.6m GGR (21%) and DraftKings at $22.6m GGR (16.5%). Those three companies were also the heaviest promo spenders. FanDuel with $5.5m (26.8% of handle) was just ahead of DraftKings at $5.4m (26% of handle), BetMGM was third at $4.5m (22.1% of handle).  

Newlines

Unfazed: DraftKings has signed up as the official sports-betting, igaming, fantasy sports and free-to-play partner with esports platform Faze Clan. Matt Kalish, co-founder and president of DraftKings, North America, said Faze Clan was a “juggernaut of internet engagement and culture”. 

What we’re reading

A plea for igaming from Gambling’com’s Charles Gillespie. In the Chicago Sun Times.

Game over: FanDuel unlikely to win out in ‘same-game parlay’ trademark bid.

On social 

It’s all kicking off at Elys Technology 

Elys Game Technology @ELYS_Gaming

$Elys_gaming actually respects its shareholders by organising calls after giving a fair period of time to review the work done and results. Does it make sense that a company that grew by over $300 million in sales year over year has a such a reckless and irresponsible sell-off.

November 18th 2021

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Calendar

• 22 Nov: Elys Technology

• 23 Nov: Genius Sports

• 24 Nov: Rivalry

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com